Pacific Gas and Electric Co., the utility behemoth that services San Francisco and Northern California, is set to announce a new incentive program that pays customers a lump sum for every kilowatt-hour (kWh) of energy they save over the first year of a virtualization project.

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Details of the new incentive program will be formally announced at VMworld 2006 next month, but PG&E representatives attending the Data Center Decisions conference in Chicago on Wednesday told SearchServerVirtualization.com more about the arrangement. They said the company had recently approved a plan to reimburse up to 50% of the costs of a server consolidation project, including software, hardware and consulting, up to a maximum of $4 million per customer.

"We will calculate the energy consumed by existing servers and subtract the difference in the energy consumed by the new servers," said Randall Cole, senior project manager for PG&E's Customer Energy Efficiency program. "Then we'll pay 8 cents for every kWh saved over the first year of the server virtualization implementation."

Electricity rates for PG&E's non-residential customers currently stand at 12 cents to 15 cents per kWh.

Cole said that two customers participating in the pilot program had already achieved "staggering" consolidation rates using virtualization. One customer is using VMware to reduce the number of servers in its data center from 1,000 servers down to 270. Another customer is virtualizing 260 physical servers onto 11 VMware hosts.

"It's just amazing," said Cole of the consolidation ratios he has witnessed.

PG&E is currently working closely with VMware, but is also looking to partner with large server OEMs such as Sun Microsystems Inc., IBM and Hewlett-Packard Co. "We don't care what server virtualization platform you use," said Mark Bramfitt, supervisor for high tech, biotech and medical segments of PG&E's Customer Energy Efficiency program, "although, clearly, VMware is the largest partner."

Bramfitt said partnering with large server OEMs will help PG&E ferret out smaller data centers throughout the state. Currently, the company estimates that data centers consume between 400 and 500 megawatt-hours of power in PG&E's service area. However, only the largest of those data centers are known to PG&E; the rest of them are hidden in server rooms across the state. "We need the HPs of the world to tell us who they are," Bramfitt said.

He added that PG&E is working with several other California utility companies, including Southern California Edison and San Diego Gas and Electric, and expects them to adopt similar incentive programs in the coming year. Going forward, he said he hoped utilities in other parts of the company would follow suit, most notably in New York.

Seeing green

What's in this incentive plan for PG&E? The motives are fairly obvious: "We don't want to build any more power plants," said Bramfitt. At the same time, "regulators have told us loud and clear that we need to meet certain energy efficiency goals," he said. "We want customers to save energy, and we will pay them to do so."

"It's environmentally green and financially green," Bramfitt said.

PG&E already offers businesses several rebate and incentive programs to inspire non-residential customers to save energy, including energy-efficient servers, fan-assisted racks or by using outside air to cool the data center. But "some of the measures we promote aren't gaining as wide acceptance as virtualization," said Bramfitt. For example, in the case of using outside air to cool data centers, "customers are concerned about humidity and contaminants," he explained.

Virtualization, on the other hand, is seeing rapid adoption by IT, and PG&E wants "to make it even more attractive," Bramfitt said, by essentially matching the capital outlays inherent in buying new hardware, software and consulting for a virtualization project.

"Virtualization isn't mainstream yet, and once it ramps up, I'm not going to incent it anymore," Bramfitt said. "But, in the meantime, I'm going to do whatever I can to light a fire under peoples' butts."

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